II.

MODULE I

The purpose of this module is to conduct on-site examination of teller operations relative to Financial Recordkeeping and Reporting Regulations. This module sets out procedures and guidelines the examiner should use when conducting test checks for compliance with the regulations. Criteria for selection of branches for detailed review are listed along with general guidelines applicable to either multiple or single office financial institutions.

This phase of the examination should include a minimum of five (preferably ten or more) days of transactions and one to three branch offices. Branch examinations should encompass a review of the work of selected tellers within the days selected.

The selection of tellers should be governed by the bank's internal procedures. For example, if it is the bank's practice to direct all large currency transactions to specific tellers, the examiner may concentrate on the work of those tellers. In the absence of such procedures, or if the procedures are not being followed, the work of all tellers should be reviewed.

I.

Complete Exhibits A and B: A Review of Currency Distribution/Cash Control
Center and Branch Operations

A.

B.

C.

D.

Submit Exhibit A, the Currency Distribution and Cash Control Center
Letter and its attached Currency Shipment/Distribution Report to the
Officer-in-Charge of the Center.

If branches ship directly to a Federal Reserve Bank or a correspondent institution, then a copy of Exhibit A must be submitted to every branch that does ship currency directly to a Federal Reserve or correspondent institution.

Check the records maintained at the currency distribution/cash control center or the branch to ensure that the information in those records is compatible with information provided by the Officer-in-Charge in Exhibit A and the guidelines outlined below. (See Section II.)

A Branch Office Letter (Exhibit B) should be personally addressed and sent to every branch.

Guidelines for Selection of Branches for On-Site Review

A.

In reviewing the information provided in Exhibits A and B, examiners should use the following criteria to select those branches for on-sight review.

1. Branch requests for large denomination currency represent the most significant portions of their total currency requirements;

2. Branch requests for large denomination currency are significantly greater than average branch requirements;

III.

B.

3. Branch does not ship large denomination currency;

4. Branch reports no exempt list;

5. Branch manager would not sign the statement (Exhibit B); and

6. Branch is characterized by unusual cash transactions with Cash Control Center, Federal Reserve Bank, or correspondent institution.

In the absence of significant leads, consider selection of branches for onsight review by sampling on a random basis.

General Guidelines for On-Sight Review

A.

B.

When at the office location, the examiner is to review the work of selected tellers within a specific time period. (See above criteria for selection of tellers. Recommended time period: minimum five days, preferably ten days.) The examiner should take into account the time period allowed for filing Forms 4789 and 4790 in selecting the time frame in which the examination will be conducted. For example, if the date of examination is 12/31/80, the grace period for filing is 15 days, and the examiner is reviewing transactions for 2 weeks, or 14 days, then the examiner should review transactions at least 29 days before 12/31/80.

Obtain, for selected tellers, completed cash proof sheets for as many consecutive dates as practical. From a day-to-day comparison of total $50 bills and $100 bills, determine specific tellers who experienced a significant ($10,000) fall-off in these denominations that is not supported by the tellers' transactions. Incidents of this type should be reported to management as possible incidents of currency washing.

Review Procedures for Selected Tellers and Selected Dates

IV.

A.

Obtain and review tellers' documentation for the selected dates.

B.

C.

D.

E.

Note any cash-in or cash-out transactions of more than $10,000.

In instances where such transactions are discovered, determine the type of transaction and if it was reported. Transactions with non-exempt customers not reported should be researched to ascertain if they are truly subject to the regulation.

Review consecutive transactions which total in excess of $10,000 to ascertain if made by or for one depositor.

The following transactions should be checked:

1. Cashed checks items should be traced to ascertain if they are a cash-out of more than $10,000 or part of a split transaction. Split transactions which do not involve a cash-out of more than $10,000 should be eliminated.

V.

4. Personal money orders or official checks sold any sale for more than $10,000 cash must be reported, even to an exempt customer. Be aware of consecutive items sold. A check of paid items could reveal that they were sold to same customer.

E.

7. Loans note teller receipt or pay-out of more than $10,000.

8. Securities sold or purchased if institution acts as agent for an individual and the transaction involves more than $10,000 cash.

The examiner should obtain and review the list of exempt customers. Lists which appear inordinately long or which contain names of customers the size or nature of whose business would not ordinarily merit exempt status should be discussed with management of the institution under examination. If after discussion with management, the examiner feels that criticism may still be warranted, the matter should be referred to the examiner's supervision department or regional office.

List exceptions for possible inclusion in the report of examination.

To facilitate our examination of compliance with Financial Recordkeeping and Reporting Regulations under Public Law 91-508, please furnish the examiner-incharge with the information listed below.

Examiner

1)

A copy of your list of customers who normally have currency transactions over $10,000 (exempt customers).

2) Describe how currency transactions over $10,000 for customers are recorded and reported by individual tellers at your office.

3) Describe the records used at your office to document, by denomination, currency transfers between tellers, including transfer from and to vault cash.

4)

5)

Name of person in your office who is responsible for filing Currency
Transaction Reports (Form 4789).

Indicate where copies of all Currency Transaction Reports (Form 4789) prepared by your office are maintained.

6) A list of all transactions for which Currency Transaction Reports (Form 4789) are due to be filed but have not yet been submitted by your office.

7) If periodic reviews are conducted by office management of exempt customers to ensure that their status has not changed under Recordkeeping and Reporting Regulations, please make supporting documentation available, including:

names of individuals who conducted the review and their findings.

Currency Transaction Reports (Form 4789) have been completed for all required transactions. Lists of customers who normally have currency transactions over $10,000 (exempt customers) are currently maintained.

(Signed)

Office Manager